Demand still rising for 5 year fixed rate mortgages, says Abbey

21 May 2008 / by Rachael Stiles

The homebuyer's appetite for five year fixed rate mortgage deals has doubled in the course of three months, Abbey has said.

There has been increasing demand amongst homeowners for a third consecutive month, the Abbey Mortgage Index has revealed, finding that 30 per cent of mortgage customers would now opt for a five year fixed rate deal if they were going to remortgage.

In February, demand for the longer-term stability that a fear fixed rate can bring was at seven per cent. This grew to 12 per cent in March, doubled to 24 per cent in April, and increased even further in May.

Abbey predicts that the majority of this demand will be from the 3,835 people whose fixed rate mortgage deals will be ending this year, as they struggle to find security in the uncertain financial climes where budgets are stretched and rates are raised.

Demand for medium fixed rate deals was also sustained, with eight per cent of mortgage customers opting to fix their interest rates for two of three years, while demand for standard variable rates has halved from two per cent in April to one per cent in May.

Illustrating Britons' wariness of the current state of the economy, just three per cent said that they would opt for a two year tracker mortgage, and four per cent would go for a flexible tracker.

"Opting for a longer term fix rate mortgage will provide mortgage borrowers with financial security in uncertain economic times." said Phil Cliff, director of Abbey mortgages.

He said that "Whilst the May decision by the Bank of England was to maintain the base rate at five per cent, inflationary pressures mean that it is unlikely to fall again soon, and some commentators even think that inflation could lead to increasing mortgage rates."

The total demand for fixed rate mortgage deals has increased from 35 per cent in March to 56 per cent in May.